Bonito Ruiz Molinar - Page 10

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          Petitioner underpaid his tax each year for which Roberts applied            
          the source and application of funds method.                                 
               2.   Fraudulent Intent                                                 
               Respondent must prove by clear and convincing evidence that            
          petitioner had fraudulent intent.  Parks v. Commissioner, supra             
          at 664.  Fraud is defined as actual, intentional wrongdoing,                
          Mitchell v. Commissioner, 118 F.2d 308, 310 (5th Cir. 1941),                
          revg. 40 B.T.A. 424 (1939), or intentionally committing an act              
          for the specific purpose of evading a tax believed to be owing.             
          Webb v. Commissioner, 394 F.2d 366, 377 (5th Cir. 1968), affg.              
          T.C. Memo. 1966-81.                                                         
               The Commissioner may prove fraud by circumstantial evidence            
          because direct evidence of the taxpayer's intent is rarely                  
          available.  Stephenson v. Commissioner, 79 T.C. 995, 1005-1006              
          (1982), affd. 748 F.2d 331 (6th Cir. 1984).  The courts have                
          developed a number of objective indicators or "badges" of fraud,            
          such as:  (a) A pattern of understatement of income, (b)                    
          inadequate books and records, (c) implausible or inconsistent               
          explanations of behavior, (d) engaging in illegal activities, and           
          (e) failure to cooperate with tax authorities.  Bradford v.                 
          Commissioner, 796 F.2d 303, 307-308 (9th Cir. 1986), affg. T.C.             
          Memo. 1984-601.  We consider all of the facts and circumstances             
          of each case to decide if fraudulent intent is present.  King's             
          Court Mobile Home Park, Inc. v. Commissioner, 98 T.C. 511, 516              
          (1992); Recklitis v. Commissioner, 91 T.C. 874, 910 (1988).                 




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